CORRECTION (Published 2/23/2013) A story about a lawsuit filed against the state Department of Finance by the Livermore Valley Performing Arts Center incorrectly reported the title for Len Alexander. He is the executive director of the center.

LIVERMORE -- Backers of a Livermore regional theater are suing the state Department of Finance to try to hold on to more than $120 million in redevelopment funds needed to help pay for the project.

The suit was filed Jan. 23 in Sacramento Superior Court by the nonprofit Livermore Valley Performing Arts Center. It seeks to overturn a Finance Department decision to deny future tax increment money for development and construction of the theater.

The funding, the suit states, stems from agreements made by the performing arts center with the city and the city's now-defunct redevelopment agency. The agreements were made before the state abolished redevelopment agencies in 2012.

"In our view, this was a pre-existing obligation way before the state decided to do away with RDAs," said Len Alexander, the center's executive director. "Since the appeal process is over, we have no choice but to sue."

The Department of Finance sent an Oct. 1 letter to City Manager Marc Roberts informing the city of the decision to deny the funds.

The Finance Department met Oct. 24 with the city's redevelopment successor agency regarding the theater and other items denied by the department, and, following a review, upheld its decision in December.

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"The reason for not approving the item, in a nutshell, is that while the city indicated they were willing to undertake the responsibilities of the former redevelopment agencies, the powers and duties of the former RDAs that were involved do not transfer over to the city," said H.D. Palmer, spokesman for the Department of Finance.

Livermore assistant city manager Troy Brown did not wish to comment on the litigation because the city is not a party to it.

The Finance Department letter indicates that as part of an agreement between the theater backers, the city, and the redevelopment agency, the nonprofit would have needed to issue $98 million in bonds to fund the project. The bonds had yet to be issued, the letter states, meaning the project isn't eligible for use of redevelopment money.

The performing arts center's suit says the nonprofit entered into a series of binding legal agreements with the redevelopment agency and the city of Livermore from 2005 to 2011, pre-dating the state Legislature's abolition of local redevelopment agencies in February 2012.

A building permit was issued for the 2,000-seat theater in March 2011. Alexander said the state's decision threatens the future of the theater and the $9.2 million the nonprofit has already invested toward it.

"Conveniently, the first time a payment would've had to be made, they woke up and suddenly decided they didn't want to pay it," Alexander said. "In our view it's totally arbitrary; they're making the rules up as they go along."

According to the California League of Cities, the theater group's action isn't unique. The league has tallied almost 60 lawsuits brought by cities, nonprofits and other groups seeking redevelopment funds denied by the state.

"It creates a significant amount of uncertainty," said the league's general counsel, Patrick Whitnell. "How do know that you can do anything under that contract if the Department of Finance can come in and review it and, at any point, deny it?"

Several of the cases have been successfully argued in court, Whitnell said.

The Department of Finance has until March 11 to respond to the Livermore Valley Performing Arts Center's filing. A decision is expected to take six to eight months.